Gold futures score 5th straight session gain

SAN FRANCISCO (MarketWatch) — Gold prices settled higher on Tuesday to mark their fifth straight session gain, even as some analysts cautioned the gains could be fleeting.

Gold for August delivery
US:GCQ4
edged up by $2.90, or 0.2%, to settle at $1,321.30 an ounce on the Comex division of the New York Mercantile Exchange. It has now tallied a five-session gain of roughly $49 an ounce, or nearly 4%. On Monday, the shiny metal also inched higher, building slightly on last week’s advance of 3.3%.

On Comex, gold prices have also now posted gains in 11 out of the previous 12 trading sessions.

“It is Iraq and the Middle East which is the key reason for the rise in gold,” said Chintan Karnani, chief market analyst at New Delhi-based Insignia Consultants.

But there are “still huge short positions in gold and silver,” he said. “Some of the investors have started exiting their short-term sell positions in gold and silver as there are no signs of a reversal at the moment .... Silver is also supported by global economic optimism for the rest of the year and next year.”

But Karnani said he is “not very optimistic on global economic growth next quarter, due to higher energy prices.

“Slow growth implies delay in interest rate hikes by the Federal Reserve and Bank of England, which should be bullish for gold and silver,” he said. “For now I keep my fingers crossed over the sustainability of the rise in gold and silver.”

July silver
US:SIN4
gained 13 cents, or 0.6%, to end at $21.04 an ounce.

In U.S. economic news on Tuesday, the S&P/Case-Shiller’s 20-city composite index indicated home prices rose 1.1% in April. A gauge of consumer confidence rose to 85.2 in June, the highest level since January 2008 and new homes sold at an annual rate of 504,000 in May to mark the fastest increase in six years.

‘Temporary’ rally

In a note Tuesday, Andrey Kryuchenkov of VTB Capital said that “from the longer-term investor perspective,” gold’s price rally is “only temporary.”

He said the advance has been “pre-dominantly driven by uncertainty in Iraq where the government in Baghdad is struggling to halt the rapid advance of Sunni militants.”

Reuters

Gold investors continue to keep an eye on the conflict in Iraq.

In Iraq on Tuesday, embattled Prime Minister Nouri al-Maliki and other top Iraqi politicians reportedly have pledged to start forming a new government by July 1, according to a Wall Street Journal article.

“The downbeat Ifo report adds more weight to the notions that the European Union’s economy remains in serious trouble,” said Jim Wyckoff, senior analyst at Kitco.com, in a note Tuesday. “This is also an underlying supportive factor for the safe-haven gold market.”

Beyond safe-haven demand, Wyckoff said a “much-improved technical posture” is helping to fuel “upside price pressure” for the yellow metal.

Adding further support to gold were concerns over inflation. “The gold market is beginning to focus more on inflation as multiple indicators have suggested that a bottom is in,” said Tyler Richey, an analyst for the 7:00’s Report.Combined with a seemingly eternally dovish Fed, “the threat of a material uptick in inflation is increasing.” Gold is often seen as a hedge against inflation.

In other metals action, July platinum
US:PLN4
rose $15.30, or 1.1%, to $1,471.90 an ounce, while September palladium
US:PAU4
added $7.75, or 0.9%, to $830.40 an ounce.

High-grade copper for July delivery
US:HGN4
closed roughly unchanged at $3.15 a pound.

Shares of gold and silver miners took a turn for the worse on Tuesday afternoon, with the Philadelphia Gold and Silver Index
XAU, -1.75%
down 1.7% and set to give back nearly all of the gains it saw a day earlier.

Shares of Coeur Mining Inc.
CDE, -5.24%
were unchanged after posting notable gains earlier on in the session. Cowen & Co. raised its price target on Coeur Mining to $10.49 from $9.42 after the company said late Monday that it plans to terminate an existing royalty-stream agreement with Franco-Nevada Corp.
FNV, -2.06%

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